Food for Thought, or Rather, a Tribute to Food Processing

The FINANCIAL -- Visiting foreigners and locals alike would not dispute thatGeorgian fruits and vegetables are naturally delicious. Many visitors, in fact, after having tasted Georgian tomatoes in season, refer to them as fruits rather than vegetables,owing totheirexplicit and delightful flavor. The country indeed has land soils with high agricultural potential. In the Industry Insights of this issue Experto would like to focus on what happens to abundant Georgian produce after harvesting,which, for one reason or another, ends up beingprocessed for later consumption.

Obviously, production of fruits and vegetables is a key factor in ensuring a continuous supply of raw materials for the development of agribusiness in horticulture. Fruits and Vegetables can be processed in many ways depending on the type of raw material and end-product. There are two major sectors, fresh packed products and processed products. This time we will be concentrating on the latter sector and its well-established as well as new players in Georgia. Before zooming in on the interviewed actors, it should be noted that the techniques most frequently used for processing are: canning or bottling accompanied by heat treatment; refrigeration or freezing; fermentation; drying; pickling; and chemical preservation.

Food manufacturers,in general, are on the hunt for more cost-effective means of manufacturing, standardizing equipment and exploring automation to minimize labor costs. But because consumers have become more aware of what they are eating, an increasing interest in organic and natural foods can be observed vividly. From a manufacturing standpoint, this presents more challenges in terms of equipment types and how materials are processed. The handling is different for these products, impacting how lines are set up and operated.

The Group, comprised of AromaProduct LTD and Georgia’s Natural, has already reacted to the demand for organic and natural foods. Mr. Vladimir Gugushvili, respectivelythe General Director and Managing Partner/Founder of both companies, spoke to Experto about their business model and key success factors. The Grouphas been operating since 1985and currently is theleading 100% export orientated fruit and vegetable processing company with 60% of total national export share of fruit juices and non-alcoholic beverage products. “Our company is specializing in production of high quality organic and conventionalnatural juices, IQF (Individually Quick Frozen) fruit and berries, jams, comfitures, preserved fruit, sauces, spices, edible nuts and honey products”, explained Mr. Gugushvili. He further elaborated that “our company is officially registered as an organic product processor and producer consistent withEUas well as US organic operation rules”. Moreover, the Group is the pioneer in organic farming:“Presently, we run the largest,650 hectares of organic farm in the region”, where they grow vast varieties of organic fruit, berries, cherries, vegetables and nuts.

The Founder has proudly declared to Experto that“we are the pioneer in popularization of pomegranates and pomegranate farming in Georgia. We have initiated the first export of pomegranate juice back in 2000 and plantation developments at a large scale - since 2006”.

According to Mr. Gugushvili, the lack of expert professionals in basically every field is the most noticeable drawback in Georgia, alongside with the problems associated with logistical issues. But their business has seen a stable 10% annual sales increase for the past 5 years. Sales are made outside Georgia only: “USA, Japan, UK, Western European countries, Canada, China, South Africa and Kazakhstan are a few among the many counties where we sell our products”, concluded Vladimir.

Chirifruit produces different kinds of dried fruits, tklapi (a traditional Georgian puréed fruit roll-up leather) and chocolate sweets from Georgian fruits.Ms. Sophio Jikia, Director, revealed to Experto that Chrifruit plans to open a shop and develop own distribution chain. Their products are currently sold in Georgia only and can be found at Smart, Fresco, Cheese House, Paprika, Aristeus, and Tea Mania outlets.

A starchy vegetable, potato and popcorn processor, Wellington LTD produces chips and popcorn under the brand name of FRIXX. Ms. Mariam Gabatashvili, Brand Leader, revealed to Experto that they currently work on expanding their product line and are considering producing sunflower seeds as well. “We have found an untapped niche in Georgia and are the first and only company that produces potato chips in Georgia. Our aim is to start exporting to Armenia shortly, and eventually cover the entire Caucasus region”, further elaborated the Brand Leader. The Company cooperates with Georgian schools and universities and sponsors various events by supplying their products. Wellington went one step further and sponsored a full year scholarship for a student that passed the Agrarian University with the highest scores.

Kareli Fruits, previously known as Kareli Agro Industry,was established in 2015. The Company is a dynamically growing new Georgian enterprise. Specializing in high quality fruit products, they deliver nutritious fruit-based food solutions, Chikori dried fruit snacks as well as Delia cold-pressed fruit juice, to retailers and individuals who embrace healthier and more active lifestyles. According to Mr. Giorgi Kvirikadze, Director of Kareli Fruits: “Kareli Fruits’ plant is ideally located in Kareli - one of the most productive, pristine and celebrated fruit growing regions in Georgia”. He further elaborated that “Delicious and Healthy is our core philosophy, applying these concepts to every aspect of operations including product development, manufacturing, and community relations”.

Distinguished by locally sourced fruits naturally rich in flavor, vitamins, and minerals, Kareli Fruitsprovides healthier food choices to businesses and end-users. In 2016, with the support of the Agricultural Project Management Agency (APMA) of the Ministry of Agriculture of Georgia, the Company has been able to obtain state-of-the-art processing equipment and maintain vital marketing activities. The same year, Kareli Fruits successfully implemented ISO22000 within its dried fruits production, which is the most important milestone for the Company. “Not only that is the guarantee of the credibility, quality and reliability of our product range, but it subscribes us to better management systems in line with the best international standards. This was a result of successful partnership with USAID’s REAP Project”, explained to Experto Mr. Kvirikadze. At present, the Company is working on expanding the product range: “two new products are already under the development”, sad the Director.

The company aims to cover the regions of Georgia and once it gets established firmly in Georgia, seriously consider exporting to the EU market: “given the opportunities DCFTA opens up for us, we will also take a closer look at the EU countries and weighthe possibilities of entering the EU market in the future”, clarified Mr. Kvirikadze.

“For all small and medium local producers in Georgia, the biggest challenge is penetrating the retail market. While big importer companies are represented quite well in the modern retail outlets due to the larger scale and available resources, Kareli Fruit, like other similar sized companies, is struggling to successfully expand in this direction” expressed concern Mr. Giorgi Kvirikadze. Many local SME companies have been receiving support from the Ministry of Agriculture of Georgia and donor organizations to improve their production practices and produce excellent, competitive products, but given the limited resources and lack of marketing / bargaining power, they cannot compete on equal terms with the giant processors for the adequate shelf space.

On a side note, just to name a couple of governmental incentivesfor processing plants: the projects of building new agricultural products processing plants can get grant from the government with a total value of up to USD 250,000 - maximum 40% of the value of project. Additionally,an investor can buy a state owned immovable nonagricultural property for a symbolic price of GEL 1 if the investment made on processing plant is 4 times more than its market value.

With the takeover of the Internet and pricing transparency for consumers, pressures are rising for food manufacturers to be low cost. They are trying to find ways to drive more value, looking for innovations that can help maintain profitability. Georgian processors have a realistic potential to compete by quality rather than quantity across the world. Let this be food for thought for now.